New Financial Products

Goldman Sachs recently announced a new exchange-traded fund (an ETF).

ETFs are relatively new. When the technicals become unreliable, because the wealth that forms the capital is too consolidated, risk-hedge devices emerge to effectively correlate with the perception of “the risk.”

Without reliable, technical indicators, the risk has a more random appearance. The standard for hedging the uncertainty is to diversify the portfolio.

ETFs combine stochastic measures (probable-trend analyses) with diversification. These instruments can then be used to create value derived from the risk, which is then booked as a profit, derived from someone else’s losses. However, over time, in late order, it does not appear that the losses deliberately derive from the losses, but they deliberately do, which is why Goldman Sachs is now selling exchange-traded funds.

Risk analysts have expressed concern over the macro-risk dimension of a proliferating ETF market. Their concern correlates with the effective consolidation of the risk.

The effect of consolidated risk is its accumulation. It is a natural effect but highly detrimental because the risk of loss tends to occur in a sudden, macro-risk dimension, hidden in the consolidated risk proportion referred to as “the hedge.”

This problem with “the hedge” actually causing the risk to be hedged is what Congressman Levin was talking about during hearings on what caused the last financial crisis (and the ongoing Great Recession described as a long-tail recovery). He found the argument (the “makers” make) that “intention does not effectively correlate with the outcome” to be not especially convincing… and he’s right!


About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
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